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A Win for Rational Thought In Alcohol Advertising – 8th Circuit Asks District Court to Consider Whether There’s A Correlation Between Alcohol Advertising Regulations and Their Intended Objectives In Order to Satisfy First Amendment Scrutiny

It’s not just that some 20th Century laws are not equipped to handle 21st Century problems. (I read that in a Google ad a while back and still think it is a great statement.) Its that since the time when many of the problems asserted in the alcohol industry were the subject of “tied-house” and other regulations, different regulatory responses have come along and out-performed the archaic “fixes” aimed at an era that barely had the radio, electricity, and running water, and hadn’t even heard of satellites, skype, email, computing, and video recording. Antitrust regulations handle “tied-house” worries in other industries, the FDA and USDA do a fine job governing and regulating the safety of food and beverage products (and they do it for raw meat and vegetables – products much more susceptible to contamination than those that are boiled for 7 hours or distilled and contain an natural antiseptic like alcohol), the processing, tracking and collection of taxes can be monitored electronically, so you don’t need separate tiers to verify or “rat” on each other regarding sales figures. So it’s really that even 20th Century fixes haven’t been applied to advance the industry and ease regulatory burdens (skype excluded).

So it makes sense that bit by bit, companies and industries are standing up to the irrational and unsubstantiated claims regarding the stated goals of the laws and regulations governing alcohol and showing that the justifications authorities have touted for ages (stop underage drinking, protect the tax, avoid contamination) are noble goals, but are not accomplished by the laws and regulations imposed by the Federal and State government, and courts are starting to listen.

We previously wrote about this case after the oral argument had occurred late last year. You can read that post here. Basically, an advertiser, a manufacturer, and a retailer brought a suit to stop Missouri from regulating truthful advertising by banning certain forms of advertisements and compelling others.

Barring wholesalers, wineries, distilleries or breweries from advertising sales at a single retailer as opposed to promoting two or more (worries about tied house favoritism?)

Barring media companies, radio stations, television stations and newspapers from running ads promoting bar specials or liquor store specials where alcohol is sold at a discount (the first rule of happy hour is don’t talk about happy hour?)

Barring retailers from promoting or advertising sales of alcohol at a discount to move aging stock, especially if the sale is at a level below the price the retailer paid for the alcohol from a wholesaler.

The district court revived and granted the defendants’ motion to dismiss after denying plaintiffs’ summary judgment motion. The plaintiffs appealed and the 8th Circuit’s recently issued opinion finds fault in dismissing the case, reversing the dismissal and criticizing any form of lazy fact-finding that might allow for dismissal through accepting the State’s “just-so” assertions (unfounded by rigorous scientific study) that the laws accomplish goals like curbing excessive or underage drinking.

While worth a read in its entirety, some of these gems are:

First, the amended complaint included sufficient allegations that the challenged provisions did not directly advance the substantial interest of promoting responsible drinking. This consideration “concerns the relationship between the harm that underlies the State’s interest and the means identified by the State to advance that interest.” … Defendants “‘must demonstrate that the harms [they] recite[] are real and that [defendants’] restriction will in fact alleviate them to a material degree.’”…

Defendants argue there is a “commonsense link” between advertising and increasing demand for a product. It is true that it is “a matter of ‘common sense’ that

a restriction on the advertising of a product characteristic will decrease the extent to which consumers select a product on the basis of that trait.” … But the common sense link between advertising promotions and increasing demand for alcohol does not demonstrate the challenged restrictions directly advance the interest in promoting responsible drinking. A theoretical increase in demand for alcohol based on a lower price does not necessarily mean any consumption of that alcohol is irresponsible.

The allegations in plaintiffs’ amended complaint make clear the challenged provisions do little, if anything, to advance the asserted state interest. The multiple inconsistences within the regulations poke obvious holes in any potential advancement of the interest in promoting responsible drinking, to the point the regulations do not advance the interest at all. … As plaintiffs alleged in their amended complaint, the Discount Advertising Prohibition Regulation and the Below Cost Advertising Prohibition Regulation do not prohibit retailers from offering discounted prices or advertising those discounts within the retail establishment. …

Defendants assert the challenged regulations prevent retailers from luring vulnerable consumers to their places of business, yet defendants apparently are not as concerned with retailers baiting consumers to drink excessively once they arrive.

Generic descriptions of promotions (e.g., happy hours and ladies nights) could also encourage irresponsible drinking, but the Discount Advertising Prohibition Regulation does not prohibit these statements from advertisements. … Perhaps the most glaring inconsistency is apparent from the text of the regulation. This provision explicitly exempts manufacturers of intoxicating liquor other than beer and wine from its ban on advertising rebate coupons. … This inconsistency allows certain speakers to make comments that, under Missouri’s Liquor Control Law, supposedly encourage irresponsible drinking. … The messages defendants seek to prohibit are allowed in certain advertisements, yet only for a select group of alcoholic beverages. … Making all reasonable inferences in favor of plaintiffs, consumers are still exposed to advertisements of sales, discounts, and promotions of the selected alcohol products, and, thus, the regulations do not uniformly promote the asserted state interest. … Like the statute at issue in Rubin, if the true aim of the regulations is to promote responsible drinking, the inconsistencies in the prohibitions on advertisements of promotions and sales of alcohol “make[] no rational sense.”

The opinion goes on to make mincemeat of the two other regulations and Missouri’s supposed justifications for their constitutionality. Much of this opinion owes its gusto to a line of reasoning from Rubin v. Coors Brewing Company which reasoned that inconsistent standards between different categories of alcohol (beer, wine, spirits) was unfounded and ultimately, unconstitutional. Which may be a profound argument in extending other recent decisions like Granholm (at least here in the 8th Circuit).

So there you have it. This case is back down to the district court for further litigation, and while the direct holdings are a simple remand, the dicta and the analysis show that Missouri’s laws are a far cry from being narrowly tailored, and that simple claims “justifications” or “rationale” won’t be accepted without some form of justification (hopefully empirical). Perhaps it is time that broadcasters, manufacturers and retailers in other states picked up the cause and moved toward asking that states’ advertising restrictions start to comply with the First Amendment.

Aside: Of particular note to alcohol advertising geeks, will be footnote 5 of the opinion holding that their previous determination that Sorrell v. IMS Health, Inc., did not raise the bar on scrutiny for the Central Hudson test.